Insurer sued over war exclusion after Hamas attacks delay TV production

NBCUniversal Media L.L.C. units have filed suit against a OneBeacon Insurance Group Ltd. unit for breach of contract for refusing to pay more than $6.9 million in the “Dig” TV series' production delays that were caused by the 2014 Hamas rocket attacks in Israel.

Atlantic Specialty Insurance Co., a unit of Hamilton, Bermuda-based OneBeacon, says it is not obligated to pay under its policy's war exclusion, according to the June 20 complaint filed in U.S. District Court in Los Angeles in Universal Cable Productions L.L.C. et al. v. Atlantic Specialty Insurance Co.

New York-based Universal contends the war exclusion does not apply because Hamas is not a sovereign entity.

“Dig,” which is set predominantly in Jerusalem, is about a Jerusalem-based American FBI agent whose investigation of an American's death leads to the discovery of a 2,000-year-old conspiracy, according to court papers. Its 10-episode season premiered in March, 2014 on the USA cable network.

Production on the 90-minute pilot episode began on about June 1, 2014, and was completed on June 26, 2014. The show then went on hiatus. Hamas began launching rockets from Gaza into Israel on July 9, 2014. Two days later, Universal decided to postpone production, which had been scheduled to resume July 20, 2014.

However, after the U.S. State Department warned of a potential escalation in violence, Universal decided to move the production out of Jerusalem and Israel, ultimately completing it in Croatia and New Mexico.

Atlantic had issued a policy to NBC Universal covering television production losses effective Jan. 11, 2014, to June 30, 2015, according to the complaint. The insurer initially agreed after the production was first postponed that Universal's losses were covered under the policy's extra expense provision, which provides coverage for “imminent peril,” according to the complaint.

Atlantic subsequently denied coverage, however, on the basis the claim was not covered under the policy's war exclusion, although it agreed to pay six days' worth of postponement costs.

“Atlantic's position that the war exclusion applies is contrary to the policy's terms, applicable law and foreign policy of the United States of America,” states the complaint.

“In order for the exclusion to apply, under applicable law, Atlantic must establish that the events in Israel constituted a war or war-like activity between two sovereign or quasi-sovereign nations.

The United States “does not recognize Hamas as a sovereign government, said the complaint. “Rather, the United States government has officially designated Hamas as a terrorist organization,” says the complaint, which states acts of terrorism are not excluded in the policy.

The complaint charges Atlantic with breach of contract and good faith and seeks at least $6.9 million plus attorneys fees and costs.

OneBeacon said in a statement it does not comment on outstanding claims or litigation.

“There may be merit in Atlantic's position,” said insurer attorney Vincent J. Vitkowsky, a partner with Seiger Gfeller Laurie L.L.P. in New York, who is not involved in the case.

Mr. Vitkowsky said that while the complaint focuses on whether Hamas is a sovereign entity, the war exclusion also covers revolution, insurrection and rebellion.

The complaint also does not address the Israel's response to the rocket attacks according to Mr. Vitkowsky.

“A lot depends on whether the court takes evidence in the case and then what that evidence is,” Mr. Vitkowsky said.